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Market Update by Mark Glassman and Will Swarts
Rally Sputters and Ends Winning Streak
News at a Glance
- Rally Lags: Traders tap breaks early.
- More Roofs: Housing starts rise; permits too.
- Unemployment Update: Initial claims slowed.
- Package Redux: FedEx sales fall 20%.
The Lowdown
The three-session rally that perked investor hopes faltered Thursday.
Stocks went flat Thursday afternoon, as traders paused following weak earnings from an economic bellwether and middling housing data. The Dow Jones Industrial Average closed down 8 points at 9784. The Nasdaq ebbed 6to 2126, and the S&P 500 shed 3 to 1065.
Traders balked on weakness at FedEx (FDX). The package delivery firm posted a 20% first-quarter sales decline, unnerving some traders. FedEx's results are often used as a blunt indicator of broader economic conditions. Weaker sales mean fewer packages -- a sign that business spending and retail could still be slumping.
The tech sector offered little solace. Oracle (ORCL) reported a drop in sales, as well, casting more doubt over the idea that companies are ready to boost their outlays.
In economic news, the housing sector's recovery is starting to sputter. New data suggest housing starts were flat in August and building permits -- a leading indicator for the market -- declined a bit. The $8,000 federal tax credit for first-time homebuyers is scheduled to expire in November, coloring the medium-term real estate outlook.
On the Nymex, crude oil swung positive by the regular session close. In late trading, by 4:08 p.m., crude had gained 2 cents to $72.54 a barrel.
Corporate News
- FedEx beat the Street but failed to impress traders Thursday. The package delivery firm posted a 53% drop in fiscal first-quarter profit, earning $181 million, or 58 cents a share, down from $384 million, or $1.23 a share, in the year-ago period. Sales fell 20% to about $8.01 billion.
- Oracle posted a 4.4% gain in fiscal first-quarter profit, but a decline in software sales has spooked traders. The firm earned $1.12 billion, or 22 cents a share, up from $1.08 billion, or 21 cents a share, in the year-ago period.
- AMR (AMR), the parent of American Airlines, has picked up $2.9 billion in additional financing, the firm said. The money is earmarked to help the firm boost capacity.
The Economy
- Housing starts rose to an annual rate of 598,000 units in August, up from a revised July estimate of 589,000 units a year, the Commerce Department said. Building permits, a leading indicator for the housing market, climbed to an annual rate of 579,000 last month, up from a revised July estimate of 564,000 permits a year. Economists had expected housing starts to come in at an annual rate of 598,000 for August and building permits to come in at an annual rate of 583,000. REPORT
- Initial jobless claims fell to 545,000 last week, down from a revised 557,000 in the prior week, the Labor Department said. Economists had expected the number of people seeking unemployment benefits for the first time to come in at 557,000. REPORT
- The September reading of the Philadelphia Federal Reserve's diffusion index of current business activity is scheduled to be released Thursday at 10 a.m. In August, the index came in at a reading of 4.2. For September, economists expect the index to have risen to a reading of 8.0.
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